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1.How accurate was the demand forecast for the first quarter of 2005?

First, is wise to make a comparison in the individual level, between the forecasts made for the year 2004 and the real demand.

The Forecast overestimates the real demand in every single product. As it is shown in the tables above the average difference percentage in the individual level is higher that the difference percentage in the aggregate level.

What is the current demand forecasting method? Who uses the demand forecast? What are the consequences, if any, if the forecast are inaccurate?

The current forecasting method is a spreadsheet called the Forecast Master, which lists the average weekly sales history for each product family by quarter and year. For each product family, they divide the total quarters in weeks to determine the average weekly sale per quarters. Then they plug in their expected demand for the five or six quarters.

The demand forecast is used around the company, because many of the decisions made based on the demand are not just used by one person, but by the whole company instead. The forecasting is used for:

Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time.

A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy.

Aggregate Planning is an operational activity which does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the...
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